Proactively Fighting Fraud

By adopting a proactive approach to fraud within your business its occurrence can be significantly reduced.

Auditing Standard AUS210 places the primary responsibility for adopting a proactive approach to fraud with the directors and management of an organisation. For organisations that are not audited, the attitude to 'prevent' fraud still needs to start with management.

One of the first steps in developing a proactive approach to fraud is undertaking a Fraud Risk Assessment. In doing so, the culture of the organisation needs to be considered - does it encourage the reporting of suspected fraud? Employees report over 26% of fraud and are the most effective reporting source. They need to be encouraged to report fraudulent behaviour without having the 'whistleblowing' stigma attached.

Controls need to be reviewed regularly. For example, while you may consider a staff member trustworthy, if they were to go on extended leave another person will fill the position. For this reason it is imperative to consider controls in place in relation to the specific role being undertaken no matter who fills the position. Such controls may include having a clear segregation of duties and a regular review process - trusting an employee does not equate to having an effective control in place for prevention of fraud.

Any organisation implementing a Fraud Risk Assessment needs to appoint either a person or team to be in control of the review and any implementation of changes needed to strengthen controls and carry out the implementation of the fraud control strategy.

This person or team will also be the key contact for staff if they suspect someone of fraudulent behaviour. At this point the organisation will then need to consider whether it has the skills internally to conduct an investigation.

Similarly a decision will need to be made as to whether fraud will be reported to the police. It is recommended that fraud, once investigated and proven, be reported to the police (and any other regulatory body that may be required).

If you do choose to report fraud to the police, anyone who has dealt with the legal system knows it can be a long process. It is important though to think of the situation in terms of the following: if the matter is not reported to police the worst case scenario for the offending employee is that they are no longer employed and will have on average, as stated previously, $98,000 to fund their job search. By reporting fraud you are sending a strong message of deterrence to other employees.

While it is not possible to guarantee 100% that fraud will never occur, there are steps that can be taken to reduce the chances of it happening to your business.

Author Credits